Your business’ working relationships with suppliers, customers, and service providers are vitally important. To clearly define the roles, expectations, rights, and responsibilities in the form of a written agreement are frequently necessary. The key is to draft a document that is comprehensive in scope that addresses potential sources of disputes and liability which, after negotiating the terms, is ultimately beneficial to all parties. A lawyer who truly understands business contract law is a tremendous resource for organizations of all sizes. We know what is required to protect the best interests of your business.
Business contracts are legal covenants between parties used to define the terms and conditions of how they will conduct business. Although the terminology may slightly differ, they contain several key elements including:
- Parties: This refers to the entities included.
- Offer and Acceptance: Includes provisions such as what services one party is agreeing to perform, or what that party will refrain from engaging in and what the other party will do in response (for example, obligation to pay for services rendered).
- Legal Purpose: Valid contracts must have legal purposes at their core, meaning they must be focused on actions which are not illegal in nature.
- Consideration: The benefits that both parties receive in entering the agreement. This is the factor(s) of value making an entrance into the contract advantageous. For example, your company needs a specific part used in the production of a new product, and the supplier is motivated by receiving income for providing that part. This distinguishes contracts from gifts which are simply voluntarily given with no expectation of something in return.
- Terms and Conditions: Address the specific rights and commitments that the parties are committing to. Examples may include payment due dates, indemnification or cross-indemnification provisions, supervisory responsibilities, the beginning and end dates for the agreement and responsibilities of paying for shipping costs.
- Intention to Contract: This is another term indicating that the parties comprehend the terms of the contract and intended to be legally bound by it. For one party to claim the contract is invalid, they would have to make a case with evidence to the contrary.
Working with a business contract law lawyer in crafting legally binding agreements in the first place can prevent many potential problems later. You are much less likely to be burdened with expensive suits or court appearances. Well-constructed contracts make for better relationships and outcomes for those involved.
Avoid temptations to use pre-printed “cookie cutter” contract templates. Contracts should be drafted on the specific terms that are unique to your agreement. Laws vary based on location and if a contract is worth entering into it is worth making sure it is valid and enforceable. Avoid signing agreements you do not completely understand.
A fundamental aspect of contracting is the negotiation process. Reasons for negotiating the terms include financial terms, specifying each party’s risks and obligations, minimizing your risk to the extent commercially reasonable and, frequently, prescribing methods of resolving differences if disputes under the agreement arise later. Often proposed revisions will go back-and-forth between parties for weeks or months and addendum to the agreement are negotiated and added which serve to further illustrate or modify the terms.
Other common business contracts include:
- Stock purchases and sales and buy-back agreements
- Real estate buy-sell and lease transactions
- Loan transactions including secured and unsecured loans
Contracts are important in protecting and growing your business. Contact us today to discuss how we can help.